BP to settle federal, state and local Deepwater Horizon claims for up to $18.7 billion

The Disclosure and Transparency Rules (DTR) made by the Financial Conduct Authority govern amongst other matters the disclosure of inside information. Accordingly in compliance with Rule 2.2, BP plc makes the following announcement

Five years on from the Deepwater Horizon accident and spill in 2010, BP has reached agreements in principle to settle all federal and state claims arising from the event.

BP today announced that its US Upstream subsidiary, BP Exploration and Production Inc (BPXP) has executed the agreements with the US federal government and five Gulf Coast states.

The agreement with the states of Alabama, Florida, Louisiana, Mississippi and Texas also includes settlement of claims made by more than 400 local government entities.

The principal payments are as follows:

BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA) – payable over 15 years.

BPXP will pay $7.1 billion to the United States and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP will also set aside an additional amount of $232 million to be added to the NRD interest payment at the end of the payment period to cover any further natural resource damages that are unknown at the time of the agreement.

A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.

Up to $1 billion will be paid to resolve claims made by more than 400 local government entities.

The expected impact of these agreements would be to increase the cumulative pre-tax charge associated with the Deepwater Horizon accident and spill by around $10 billion from $43.8 billion at the end of the first quarter. Separately to these agreements, the total charge reported in BP’s second quarter results will also reflect other items including charges for additional business economic loss determinations.

The principal payments arising from the agreements will be made over extended periods of time as set out in the attached schedule of payments.

NRD and CWA payments are scheduled to start 12 months after the agreements becomes final. Total payments for NRD, CWA and State claims will be made at a rate of around $1.1 billion a year for the majority of the payment period.

Carl-Henric Svanberg, BP’s chairman, said: “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved.